It appears that Big Blue is not immune to the alluring power of moving money around to lower its effective corporate tax rate and boost profits. In fact, IBM’s effective tax rate has fallen in 12 of the last 14 years.

IBM ended 2013 with a tax provision $1.84 billion lower than it initially projected, thanks to a tax rate of 15.6 percent—compared with its forecast of 25 percent. Without the lower rate, the company’s earnings per share would have fallen from the previous year instead of rising, and net income would have missed analysts’ estimates by about 14 percent instead of 2.9 percent, according to data compiled by Bloomberg.

Further Reading

IBM, like other major tech firms including Google, use legal loopholes that allow major tech corporations to move money around on paper through a series of shell corporations in Ireland, Bermuda, and the Netherlands. The companies save big, and "best" of all, it’s currently legal. This widespread strategy of moving money around involves two specific tactics known as the “Dutch Sandwich” and the “Double Irish.”

IBM did not immediately respond to Ars' request for comment.

Big Blue maintained a Dutch subsidiary in the Netherlands since 1999, which Bloomberg notes “acts as a holding company for more than 40 IBM-owned companies worldwide, including its operations in Ireland, a corporate tax haven where IBM has thousands of employees.”

Bloomberg notes that by the end of 2012, IBM’s annual profits on which it paid zero US tax swelled to over $44 billion, the sixth-highest total of any US company.

Why the long wait?

"The drop from 28 percent in 2007 to 15.6 percent in 2013 is amazing, and it makes me wonder why they waited so long to aggressively reduce their tax burden," Samuel Brunson, a professor of tax law at Loyola University Chicago, told Ars by e-mail. "If they could drop it 12 percentage points over six years, I don’t see why they were ever paying 28 percent.

"This drives home the arbitrariness that tax havens and international tax planning bring to the tax system. If IBM could massage its tax rate like that—presumably using legal methods—the tax system loses some of its claim toward being fair. Instead, taxpayers who can afford tax advice choose their tax rate, while taxpayers who cannot [afford it] pay the statutory rate. (I assume that, were Congress to fund the IRS at an adequate rate, it could actually enforce the transfer pricing rules, eliminating some of the electivity of the tax system.)"

Other experts, including Sheila Killian, a lecturer in finance at the University of Limerick, told Ars that the Netherlands is a "real hub for this kind of tax treaty shopping."

"Still, the fact that Bloomberg report that IBM has only the sixth-highest level of offshored earnings among US firms means that they are far from the biggest US players of this particular tax avoidance game," she wrote by e-mail. "The level of inward and outward investment in the Netherlands far outweighs the capital that remains there, which indicates how much the location is used as a kind of tax hub rather than as a real investment destination."

Bloomberg’s Jesse Drucker first described the process of the Double Irish in 2010. As we have reported, here’s how it works: a company sells or licenses its foreign rights to intellectual property developed in the United States to a subsidiary in a country with lower tax rates.

The result? Foreign profits that come from that tech—like the rights to IBM’s server and cloud storage technology—are now attributed to that offshore subsidiary rather than the actual corporate headquarters. The subsidiaries have to pay “arm’s length” prices for those rights, just like an outside company would, but in reality they often don’t.

On Monday, the Organization for Economic Co-operation and Development (OECD) opened new discussions to rein in questionable tax practices. Last month, the OECD published various corporate responses to its initial proposal—needless to say, companies don’t want to stop what they’re doing.

American corporations work hard to lower their tax burden so that they can boost their profits while Hollywood studios routinely use similar creative bookkeeping to show that their movies earned them no profit at all (so that they can avoid paying as much in royalties to the talent) all the while somehow remaining in business. It's capitalism at it's very finest!

American corporations work hard to lower their tax burden so that they can boost their profits while Hollywood studios routinely use similar creative bookkeeping to show that their movies earned them no profit at all (so that they can avoid paying as much in royalties to the talent) all the while somehow remaining in business. It's capitalism at it's very finest!

This is why actor agents worth their salt negotiate a percentage of gross revenues from specific distribution channels. Net earnings are a complete fiction from the people who specialize in producing complete fictions.

There's nothing more patriotic than moving money offshore to avoid paying taxes. Just ask the famous patriot Mr. Mitt Romney!

Publicly held firms have a fiduciary responsibility to maximize returns for shareholders. The most direct route would be to reduce the tax burden, though the PR value of being "patriotic" can also create value for the company. The current thinking seems to be that the tax savings outweigh the PR. Or more precisely, other PR ventures (giving away laptops to school kids, etc.) are more cost-effective to the firm than paying statutory tax rates.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas. Bought a house? Had a child? Have ten children? Installed an energy efficient furnace? NO DEDUCTIONS. Started a business? Bought office supplies? Took a loss your first year? NO DEDUCTIONS! Used a double-Dutch sandwich with an Irish twist and a hint of lemon to move your money around the planet? Big deal. What was your gross revenue in the US before all other calculations?

Decide how much money you want to run the country, and calculate the percentage of income/revenue it will take to get that amount. Done. It should be so stupid-simple that a large multinational corporation doing business in the US can file their quarterly return on a 1040-EZ.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas. Bought a house? Had a child? Have ten children? Installed an energy efficient furnace? NO DEDUCTIONS. Started a business? Bought office supplies? Took a loss your first year? NO DEDUCTIONS! Used a double-Dutch sandwich with an Irish twist and a hint of lemon to move your money around the planet? Big deal. What was your gross revenue in the US before all other calculations?

Decide how much money you want to run the country, and calculate the percentage of income/revenue it will take to get that amount. Done. It should be so stupid-simple that a large multinational corporation doing business in the US can file their quarterly return on a 1040-EZ.

Seriously, while I'm not fanatical about it, making large corporation tax law simpler by cutting the loopholes and complicated calculations, and then imposing a flat tax based upon domestic earnings, would both a) reduce the staffing burden on Gov't b) get large corporations to pay their taxes. As a bonus, having the tax rate at something like 15% would likely entice them to do so.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas. Bought a house? Had a child? Have ten children? Installed an energy efficient furnace? NO DEDUCTIONS. Started a business? Bought office supplies? Took a loss your first year? NO DEDUCTIONS! Used a double-Dutch sandwich with an Irish twist and a hint of lemon to move your money around the planet? Big deal. What was your gross revenue in the US before all other calculations?

But where are the opportunities for graft and corruption? For taxes to punish behavior we want disincentives for and rebates for things we want people to do? We can't very well socially engineer the people if we can muck with their behavior subtly via the tax code!

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas. Bought a house? Had a child? Have ten children? Installed an energy efficient furnace? NO DEDUCTIONS. Started a business? Bought office supplies? Took a loss your first year? NO DEDUCTIONS!

Sounds great. Unless you're working poor. But I'm going to go out on a limb and guess you're not.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas.

So a US company selling things in Elbonia would pay the sum of the US tax rate and the Elbonian tax rate on its Elbonian revenue, while an Elbonian company would only pay the Elbonian tax rate? Or are you under the impression that US can pass tax law in Elbonia?

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas...

If I'm not mistaken, a flat tax on gross revenues would make many (most?) business models impossible. I'm imagining a business that pays X for its inputs (material, rent, labour, etc.) and gets X + 5% back as revenue. Flat tax higher than ~5% means no more business, does it not?

The corporate tax is just silliness anyway. Corporations reinvesting back into the business is something that we ought to encourage. We would be far better served to eliminate the corporate tax and just tax dividends (when owners withdraw profit for personal use) as normal income rather than at a special reduced rate.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas...

If I'm not mistaken, a flat tax on gross revenues would make many (most?) business models impossible. I'm imagining a business that pays X for its inputs (material, rent, labour, etc.) and gets X + 5% back as revenue. Flat tax higher than ~5% means no more business, does it not?

The business would have to pass that 5% tax along to its customers and raise prices, yes, as happens with every potential dollar a business might have to pay. Any and all costs get passed right along to you and me.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas. Bought a house? Had a child? Have ten children? Installed an energy efficient furnace? NO DEDUCTIONS. Started a business? Bought office supplies? Took a loss your first year? NO DEDUCTIONS! Used a double-Dutch sandwich with an Irish twist and a hint of lemon to move your money around the planet? Big deal. What was your gross revenue in the US before all other calculations?

Decide how much money you want to run the country, and calculate the percentage of income/revenue it will take to get that amount. Done. It should be so stupid-simple that a large multinational corporation doing business in the US can file their quarterly return on a 1040-EZ.

Seriously, while I'm not fanatical about it, making large corporation tax law simpler by cutting the loopholes and complicated calculations, and then imposing a flat tax based upon domestic earnings, would both a) reduce the staffing burden on Gov't b) get large corporations to pay their taxes. As a bonus, having the tax rate at something like 15% would likely entice them to do so.

The problem is that it's not a loophole like a special industry carve-out or bizarre subsidy for things you'd do anyway. Firms are paying taxes on their earnings in the jurisdictions where those earnings are realized. The shenanigans are moving the chess pieces just right to make all of the profits realize in the lowest-tax jurisdictions.

Any attempt to fix the problem needs to be a multilateral treaty involving all of the countries that these tech companies care about... which means getting the current tax havens to agree to kill their golden geese. These negotiations will involve a lot of sausage-making.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas.

So a US company selling things in Elbonia would pay the sum of the US tax rate and the Elbonian tax rate on its Elbonian revenue, while an Elbonian company would only pay the Elbonian tax rate? Or are you under the impression that US can pass tax law in Elbonia?

Typically the foreign income tax paid is a deduction on US corporate income tax. However, because of subsidiaries and their various places of incorporation it can get very tricky.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas. Bought a house? Had a child? Have ten children? Installed an energy efficient furnace? NO DEDUCTIONS. Started a business? Bought office supplies? Took a loss your first year? NO DEDUCTIONS! Used a double-Dutch sandwich with an Irish twist and a hint of lemon to move your money around the planet? Big deal. What was your gross revenue in the US before all other calculations?

But where are the opportunities for graft and corruption? For taxes to punish behavior we want disincentives for and rebates for things we want people to do? We can't very well socially engineer the people if we can muck with their behavior subtly via the tax code!

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

In pure numbers, yes. But in percentage? Come on.

I think the top 20% pays about 90-95% of the total income taxes paid.

Also, the poor often have a negative income tax rate because of things like the earned income credit.

Now if we are talking about things like total tax rate which includes all forms of tax (sales, property, gasoline, medicare, Social Security, liquor, vehicle and wheel taxes, tolls, and currency inflation (yes this is arguably a tax in my opinion) I'm sure it is more even. If you include all forms of tax, I don't think anyone in the middle class or higher pays less than 40%.

FIX TAX LAW NOW! Close all loopholes and make it a flat tax, across the board, as a percentage of your gross earnings for an individual, and gross revenues for a business. That's it. No deductions, no credits, no moving money overseas. Bought a house? Had a child? Have ten children? Installed an energy efficient furnace? NO DEDUCTIONS. Started a business? Bought office supplies? Took a loss your first year? NO DEDUCTIONS! Used a double-Dutch sandwich with an Irish twist and a hint of lemon to move your money around the planet? Big deal. What was your gross revenue in the US before all other calculations?

Decide how much money you want to run the country, and calculate the percentage of income/revenue it will take to get that amount. Done. It should be so stupid-simple that a large multinational corporation doing business in the US can file their quarterly return on a 1040-EZ.

Example. Retailer buys TV for $100, resells for $150, but has $30 in shipping and storage, so they gross $20 of profit, then they have to pay their workers. Then you give them a 30% tax on their $150 that they sold and have to pay $45 in taxes. $20 in gross profit, but $45 in taxes gives you a loss, and that's not yet subtracting employee wages.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

Except in markets with real competition, companies would be forced to lower prices by the same amount they were being taxed(Realtive to their income tax), and you would now know exactly what % of your income Congress was stealing from you. Also, poor people dont pay taxes. Middle class would seem to have higher prices, but they are the same. Now congress just taking it directly from you instead of taking it from you and then taking other income from you through corporations.edit: bah i replied to wrong quote

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

Except in markets with real competition, companies would be forced to lower prices by the same amount they were being taxed(Realtive to their income tax), and you would now know exactly what % of your income Congress was stealing from you. Also, poor people dont pay taxes. Middle class would seem to have higher prices, but they are the same. Now congress just taking it directly from you instead of taking it from you and then taking other income from you through corporations.edit: bah i replied to wrong quote

Poor people don't pay much income tax or a large amount of the total tax collected, but if you include all taxes paid like the list I rattled off above, they do pay a significant portion of their income. I agree that the wealthy still do pay more in both percentage and in absolute terms, but to say the poor pay nothing is incorrect.

People tend to seriously underestimate the total amount of taxes they pay because you are nickled and dimed from so many sources. There would be riots in the street if they just sent a bill each year.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

In pure numbers, yes. But in percentage? Come on.

Wake up, Neo.

The Matrix is the world that has been pulled over your eyes to blind you from the truth.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

In pure numbers, yes. But in percentage? Come on.

Wake up, Neo.

The Matrix is the world that has been pulled over your eyes to blind you from the truth.

You're confused. I'm talking percentage of personal income to taxes...not total percentage of the fed gets from the whole populace.

IE how Buffett said he was paying less by percetange than his secretary

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

In pure numbers, yes. But in percentage? Come on.

Wake up, Neo.

The Matrix is the world that has been pulled over your eyes to blind you from the truth.

You're confused. I'm talking percentage of personal income to taxes...not total percentage of the fed gets from the whole populace.

IE how Buffett said he was paying less by percetange than his secretary

That is because he pays mostly at the dividend rate and not the normal income rate. The reason this is, is to avoid double taxation on corporate profits. Dividends are corporate profits (which have already been taxed) withdrawn for personal use that are then taxed again at the dividend rate.

Corporate tax should be 0, that way youll really see your own real tax rate. If you dont know, every dollar you tax a large corp, or any business rather, is a dollar more they charge their customers. They dont pay taxes, even if theyre tax bill is billions of dollars, you are paying that tax through higher prices of their goods, not them.set the rate to 0, see how much your real tax burden is, since congress would then be forced to increase your Federal tax rate, which they are already doing though this corporate tax bs.

Except that increases the price of goods for everyone, and increase the profits of the company.The profits of the company then go to investors, who are typically the richer people.

So really you're no better off. The rich individuals still get rich, and the poorer people still pay more. It's just done in a different way.

Of course, you would also try and fix individual tax rates so those individuals paid more taxes, but when you end up with lots of legitimate overseas ownership, it's harder to sort out taxing individuals on their income from the ownership of the companies, without screwing over the companies by making it really unappetising for foreigners to invest in US companies.

Sorry, but the wealthy pay A LOT more in taxes than the poor. Whether or not they pay enough is a different debate, but there is no doubt that the top 20% pretty much pay the bills for government.

In pure numbers, yes. But in percentage? Come on.

Wake up, Neo.

The Matrix is the world that has been pulled over your eyes to blind you from the truth.

You're confused. I'm talking percentage of personal income to taxes...not total percentage of the fed gets from the whole populace.

IE how Buffett said he was paying less by percetange than his secretary

If you want to focus on percentage of income, the people really getting hosed are the middle and upper middle classes. The infamous 47% (down to 43.3% in 2013) pay no income tax, and 14.5% don't even pay payroll tax. The very rich often take most income as Dividends, like Buffett, which is being double taxed any way you look at it.

Lots of talk about who pays what taxes, but I'm not seeing actual numbers. So I went out and found some. That is the income tax situation - as of 2009 the top 10% of income earners paid 70% of the federal income taxes. And the top 25% paid 88% of the income taxes.

Further, (and this hard to see because the website cuts the table onto a separate page) the top 1% paid about 24% tax rate, the top 10% paid an average 18% rate, and the top 50% paid around 12%.

So strictly in terms of income taxes the progressive tax policy is working and the highest earners are paying the highest percentage of their income in taxes.

However, the problem is that only tells half the story, it does not account for state and local taxes, especially sales taxes which can be quite regressive. The numbers for that tell a different story. This is the DC office of the chief financial officer, and they regularly do comparisons of state and local tax burden in the biggest metro areas of each state (which is a decent estimate overall) they find that a family of 3 making 25k will have a tax burden around 11% of their income, but a family of 3 making 150k (in the top 10% of the previous study) will only have a tax burden of 8%.

edit ~ I made a mistake in interpreting the DC CFO data - that is strictly state and local tax burden. No federal taxes of any kind are included. I need to find good data on computing the combined tax burden by income level.

Lots of talk about who pays what taxes, but I'm not seeing actual numbers. So I went out and found some. That is the income tax situation - as of 2009 the top 10% of income earners paid 70% of the federal income taxes. And the top 25% paid 88% of the income taxes.

Further, (and this hard to see because the website cuts the table onto a separate page) the top 1% paid about 24% tax rate, the top 10% paid an average 18% rate, and the top 50% paid around 12%.

So strictly in terms of income taxes the progressive tax policy is working and the highest earners are paying the highest percentage of their income in taxes.

However, the problem is that only tells half the story, it does not account for non-income tax federal payments (medicare, social security) nor for sales taxes which are quite regressive. The numbers for that tell a different story. This is the DC office of the chief financial officer, and they regularly do comparisons of total tax burden in the biggest metro areas of each state (which is a decent estimate overall) they find that a family of 3 making 25k will have a total tax burden around 11% of their income, but a family of 3 making 150k (in the top 10% of the previous study) will only have a total tax burden of 8%.

So while progressive taxation has worked on the income taxes, the overall tax burden on low income earners is higher than that of top income earners as a percentage of their income.

There is no way 8% or even 11% is accurate. Payroll taxes (social security and medicare) alone are more than that. Remember your employer pays half of those taxes for you. That is money you would otherwise earn as income. They also have to pay unemployment taxes for each worker as well that would otherwise be income. If those numbers are coming from that report, they left out a lot.